“The story of Circuit City is a compelling and fascinating case study in strategic management and decision making. As readers, we gain a window into six decades worth of managerial scenarios, set against the exciting and fast-paced world of consumer electronics retailing. Author Alan Wurtzel, son of the company’s founder and a longtime CEO, brings a long-term perspective and refreshing candor to his analysis of how the choices and habits of mind of an executive leadership team can take a company from Good to Great to Gone. I highly recommend this book to both business professionals and scholars.”

Carl Zeithaml
Dean of the McIntire School of Commerce

Latest Blog Post

8/8 Best Buy Going Private?

Monday’s announcement comes as no surprise.  Richard Shultz, Best Buy’s founder, long time CEO, largest shareholder and, until his recent resignation, Chairman of the Board, is contemplating a hostile offer to take the company private.

Best Buy is struggling.  In fiscal 2012, it lost $1.2 billion (albeit mostly based on restructuring write-offs). In the most recent quarter, which ended May 5th, comparable store sales were down another 5.3% and operating income down 43%. The newly installed CEO explained that “We know we have to better adapt to the new realities of the marketplace, and we are creating a long-term plan designed to make Best Buy more relevant with customers.”  Among the changes underway are closing large-format Best Buy branded stores and reformatting others. The new format will “focus on connections, services and an enhanced multi-channel experience.”

In the 1990’s, Circuit City  also struggled as Best Buy surpassed it in sales, earnings, and sales per store. It also embarked on an ambitious and expensive remodeling program, but never stepped back to take stock of its existential plight.  It never asked what a total remodeling program would cost and how it would be financed.  And most critical how it could, as a public company engage in radical surgery and still report good earnings for investors. In effect, it tried to change the tires on its car while it was still running around the track.  Another alternative would have been to go private.

An extensive store-remodeling exercise means closing stores, laying off employees, and taking a hit to earnings over multiple years.  As a private company this can be done without the adverse impact of press releases and analysts commenting on disappointing earnings.  That way, employees can stay focused on the long term and not be distracted by the declining value of their options and shares. That is what many retail companies, including Burger King in 2002, Toys “R” Us in 2005, and Dollar General in 2008, have done.

In that sense, Shultz’s efforts to go private make strategic sense.  Once the ship is righted, Best Buy can go public again, as many have.  Whether Shultz can arrange the financing to pay the estimated $24 to $26 dollars per share (the stock was at $17.50 just prior to his announcement), is hard to say at this point.  But price aside, it is very likely the right strategic move for the Company to heal its wounds, find new footing and get back in the game.

Join the conversation

Video Library

See more videos »